Blacks Leisure Submits Restructure Plan, First Half Loss Widens

Blacks Leisure Group PLC, the UK outdoor retailer, submitted a restructuring plan to its bank while significantly increasing its losses in the first half.

The firm, which runs the Blacks Outdoor and Millets chains, said on Thursday it expected to announce the details of its plan shortly, following talks with Lloyds Banking Group.

“Once the group completes its restructuring action we expect that
current market expectations of losses from the ongoing estate,
excluding the effects of the restructuring plan and the associated
costs, can still be met,” the company said in a statement. “However,
this outcome will be dependent upon Lloyds Banking Group waiving the
covenant breach, the implementation of our restructuring plan and a
normal trading level through the important Christmas period.”

In September, Blacks Leisure warned that it would breach a financial covenant test at the end of September. Lloyds agreed to a standstill on the covenant test to Nov. 30 as long as Blacks presented an acceptable turnaround plan by Oct. 30.

Blacks recorded a loss before tax and one-off items of 11.9 million pounds ($19.5 million) in the 26 weeks ended Aug. 29, compared with a loss of 4.5 million pounds the same time last year. The loss included more than 6 million pounds ($9.9 million) of costs related to restructuring and impairments across its store portfolio. It also reflected ongoing losses from its boardwear division and outdoor stores.

Blacks Leisure's Chief Executive Neil Gillis said more radical restructuring measures are needed to “free the core outdoor business from the burden of the loss-making boardwear business and a tail of stores that haven't traded profitably for many years.”

First-half revenue fell to 124.9 million poujnds ($205.7 mm) from 133 million pounds, while the gross margin fell to 51.9% from 54%.

Comparable store sales in the two months to Oct. 27 are up more than 14%, with total retail sales rising 10%. However, this has been largely driven by closing down sales in its stores that are due to close and has hurt gross margin.